BUSINESS HEALTH & FINANCE
Buying Groups:
TO JOIN
or not to join
Bob Moore qualified from ‘The Dick’ in 1967 and rose to senior managing partner in a
practice in Somerset, before retiring in 2007. He has been active in a number of veterinary
organisations, most notably BCVA where he was treasurer, BVA representative and then
President in 1997/8. He has been a long-time member of SPVS and VPMA and is currently
the latter’s treasurer. Since election to RCVS Council, Bob has served on all of its committees
and several Working Groups, chairing a number of them. He was treasurer for three years
before becoming RCVS President in 2007.
R
unning an independent business is challenging and
most business owners like to consider ways in which
they can save time, effort and money. Buying groups
(BG’s) are one way in which businesses in the same sector can
work together in order to take advantage of certain economies
of scale. They have been used in the farming and retail sectors
for many years and independent veterinary practices also have
a number of groups now available to them. But how should
a practice approach the question of ‘to join or not?’ Retired
practitioner Bob Moore takes a look.....
8 major BGs were invited to submit a list of their view of
5 advantages of belonging to a BG and 3 possible disadvantages
of membership. Responses are summarised in Table 1.
Although the author knows the names of the BGs that
responded, he is not aware of which response relates to which
BG. Some responses have been shortened and summarised.
Discussion of the feedback
Without exception, all BGs put the achieving of higher or
better discounts at the top of their list of advantages, and this
is likely to be the initial reason for a practice to consider joining
a BG.
Closely linked to good discounting on purchases is the
advantage of improved cash flow. This arises not simply from
the improved discount, but also because BGs will pay rebates
and discounts on a monthly basis rather than quarterly as is the
policy with many wholesalers.
All the BGs thought that the provision of other services is an
advantage of BG membership. These additional services include
such things as CPD, training, own brand, business support
and discounts on items other than simply pharmaceuticals.
A practice considering joining a BG should consider whether
there would be an advantage to them from the provision of
these additional services.
Saving practice administration time was also listed. Many
practices find that there is no one with a particular interest
in ‘the business side of the practice’; clinical work is far more
rewarding in their view. In such instances, the advantage of BG
membership might be a significant factor.
Other advantages listed by the BGs centre around the analysis
and management of business with a variety of input from the
BG management team. Each practice will need to consider
their own particular requirement when making a choice.
When asked for possible disadvantages of BG membership
the responses were understandably less forceful. A comment
common to all was the possible lack of clarity or lack of
transparency in the detail of exactly what discounts or rebates
were achieved by the BG, compared to that paid out to the
members of the BG.
In fact the downside of BG membership was broadly
divided into two sectors; that involving financial arrangements
in general, and that involving the reporting and analysis of
performance for the individual practice.
Although the author is not involved with BGs in any way, he
does follow comments on various veterinary internet fora and
is aware that the observations reported there, in general, reflect
the same comments made by the BG themselves.
Conclusions
There remains the question of whether or not membership
of a BG is recommended for an individual practice. All those
involved in clinical veterinary work know that a remedy for
one particular animal, flock or herd cannot be recommended
for direct transfer to another, without a full consideration of
the status of the second individual or group. Similarly with BG
membership, each practice will have to look closely at what
their current situation is, what they consider to be their own
particular goals, and whether one BG offers a deal which meets
those goals.
Anecdotal evidence and conversations with accountants
conversant with veterinary practices, indicate that the majority
of practices will benefit from BG membership. The major
Practice Life ❚ December 2013 ❚ www.practicelife.biz
BUSINESS HEALTH & FINANCE
35
TABLE 1: SOME FEATURES AND PERCEIVED BENEFITS
Improved Margins or
Discounts or Rebates
Better terms from
suppliers, particularly
on key products and
better discounts than
individual can negotiate.
Even large practices
don’t have same
buying power as BG.
Helps compete with
large corporates.
Of benefit to small
business or large
business that doesn’t
wish to devote time
to negotiating.
Easy to see terms
and net net pricing.
Savings on
pharmaceuticals, lab
fees, cremations & other
business costs.
Improved Cash Flow
Rebates paid in month
following purchase
Discounts (rebates)
paid monthly
Increased frequency
of rebate payments
Significantly improved Clear and concise
cash flow
information
Additional Support
& Services
Access to raft of other
discounted services.
Possibly own brand
range of products.
Can be range of
additional services –
should not need to
pay for many of these.
Can be a significant
feature of
arrangement. E.g
Exclusive offers, low
cost CPD etc.
Example given of
guidance through
pension scheme.
Time Saved
Someone else looks
after practice best
interests.
No need to see reps
unless specifically
wish to.
Office admin can be
redirected to practice
promotion activity.
BG team working
for practice.
Buying Power
BG has more ‘clout’ in
negotiating discounts.
Needs to have large
number of members.
Improved negotiating
lower.
Is there a true saving Some BG take over
after all BG charges
payments to wholesaler
and fees are deducted? – loss of autonomy.
Difficult to find out
Are BG charges
what is on offer
clear and transparent? making choice of
BG difficult.
Access to high quality
business support.
Consider ‘Preferred
Product List’ e.g. only
1 NSAID.
Analysis of Purchases
etc
Monthly breakdown of
spend and rebates.
Clarity of real net net
purchase prices.
Pricing Tools
Bespoke software allows Management reports
practice to manage
enable further savings
pricing and analysis.
to be made.
More Freedom to buy
range of goods.
Look for discount
arrangements with wide
range of companies.
POTENTIAL DISADVANTAGES
Lack of transparency
May be difficult to
identify actual net price
at any one point.
Worse if part of rebates
used to support growth
scheme.
Have to pay BG
rather than wholesaler
direct & receiving
wholesaler settlement
discount means lack
of clarity.
Some BGs do not
reveal rebates taken,
or commission taken.
Some BG instruct
suppliers not to
disclose deals made.
Mediocre Discounts
BG may try to cover
too wide a field and
dilute their ability to
maximise discounts.
Too many small
practices in a BG
will reduce overall
discount.
‘Payouts’ may be
quarterly, reducing
benefit of improved
cash flow.
Unmanageable
Reporting
Monthly or quarterly
reports (often as
spreadsheets) are too
detailed without some
analysis being provided
(by BG).
Can practice keep
track of discounts
and net costs over
long term?
Who is BG working for?
Large BG may have
share holders to satisfy
and with large
overheads your rebate
will be damaged.
Some BG have
preferred suppliers
limiting range available.
Long term contract
Unable to change even
Unable to change BG.
if discounts or high fees
are working against you.
Enforced Contracts.
Lack of flexibility
You are either ‘all-in’ or All prices cannot be
‘all-out’ so may lose out viewed by practice.
on some existing
arrangements with a supplier.
‘All or nothing policy’
rather than option
to choose discounts
or services.
Suppliers are losing out
Some models have low
sustainability. New, less
advantageous terms are
being introduced by
some suppliers.
Practice support
Is practice staff given
training and support?
Some BGs offer
nothing back
to suppliers.
www.practicelife.biz ❚ December 2013 ❚ Practice Life
Can practice leave
with no penalty?
Some BGs have 2
year contracts.
36
BUSINESS HEALTH & FINANCE
benefit is always the improvement of discounts, rebates and
cash flow. Other benefits, such as those suggested by the BGs
themselves, will further encourage membership, but will
invariably be secondary to the financial benefits.
Each BG has its own particular range of benefits to offer
and it is impossible to make a judgement without detailed
knowledge of the practice. At the least, a practice should ask
for contacts with two or three existing members to obtain first
hand report of the performance of the BG in question.
The advice of the practice accountant should also be sought
before making a final choice. It does appear that most practices
will benefit from being a BG member.
ADVERTORIAL
London Vet Forum Enterprise UK is a one of the longest established UK buying
groups. We have low charges and excellent discounts on a wide range of products
and services. Our aim is to be more than a buying group and to assist our members to
“Practice on a stronger footing”. www.londonvetforum.com
MiVetClub, launched recently by CVS, enables independently-owned practices to
benefit from the knowledge, experience and strength of the 250 practices which form
the UK’s largest and fastest-growing corporate veterinary group. Services include:
• competitive discounts on a wide range of veterinary products and services
• business support and management expertise
• access to exciting own brand products including POM-Vs
www.mivetclub.co.uk
Premier Vet Alliance offers flexible savings, customised to the needs of specific
practices with a three month free trial. Practices are free to choose which
manufacturer discounts to take advantage of, allowing them to maintain existing
discount relationships with individual suppliers. A low cost annual membership fee
gives access to a range of additional services all designed to improve compliance,
cash flow and client loyalty. www.premiervetalliance.co.uk
Save money, save time, increase your sales and profit.
• Reduced costs and full administrative support
• Bespoke management tools and support
• 100% of discounts passed on in full – swift, accurate and traceable
• Non-restrictive – retain clinical freedom
• Access to a wide range of supporting services, including business academy
• No joining fee, no contract, no termination fee
www.st-francis.co.uk
At Total Vet Solutions we believe that competitor buying group models are outdated.
Our approach is fair, flexible, and transparent, and demonstrates a WIN-WIN for
members and suppliers alike. We’re also run by vets. That’s why we continue to
grow and attract new members from other Groups. To learn more call Keith on
07702 163501. www.totalvetinsurance.co.uk
VetShare Buying Group, run by vets for vets, giving large group buying power
to all members.
• FREE to join • FREE three month trial • Never tied in, total clarity, low monthly fee
Speak to the rest then speak to the best on 0800 756 6636
VetSharing the benefits, get your fair share. www.vetshare.co.uk
Vetswest is the UK’s most forward-thinking veterinary buying group. Without
contracts members receive 100% of manufacturers’ superior base terms, improved
cash flow, significant savings, time management and many value-added services cost
effectively. Vetswest passes on superior terms over our competitors because of our
membership profile and the clarity of our nett nett pricing policy.
www.vetswest.co.uk
Practice Life would like to apologise for the omission of Vetcel Buying Group in the
print version of this article. For full details see www.practicelife.biz
Vetcel work to improve member’s profitability by reducing the cost of their purchases
on pharmaceuticals and other goods/services, by negotiating the very best discount
terms possible from our partners. We strive to provide a high quality, transparent and
reliable service. We pay 100% of discounts earned in the month following purchase.
We charge no membership, administration, joining or termination fee and do not tie
members into a contract. www.vetcel.com
Practice Life ❚ December 2013 ❚ www.practicelife.biz